ABOUT THE SPEAKER
Dan Ariely - Behavioral economist
The dismal science of economics is not as firmly grounded in actual behavior as was once supposed. In "Predictably Irrational," Dan Ariely told us why.

Why you should listen

Dan Ariely is a professor of psychology and behavioral economics at Duke University and a founding member of the Center for Advanced Hindsight. He is the author of the bestsellers Predictably IrrationalThe Upside of Irrationality, and The Honest Truth About Dishonesty -- as well as the TED Book Payoff: The Hidden Logic that Shapes Our Motivations.

Through his research and his (often amusing and unorthodox) experiments, he questions the forces that influence human behavior and the irrational ways in which we often all behave.

More profile about the speaker
Dan Ariely | Speaker | TED.com
TED Salon Brightline Initiative

Dan Ariely: How to change your behavior for the better

Filmed:
2,371,042 views

What's the best way to get people to change their behavior? In this funny, information-packed talk, psychologist Dan Ariely explores why we make bad decisions even when we know we shouldn't -- and discusses a couple tricks that could get us to do the right thing (even if it's for the wrong reason).
- Behavioral economist
The dismal science of economics is not as firmly grounded in actual behavior as was once supposed. In "Predictably Irrational," Dan Ariely told us why. Full bio

Double-click the English transcript below to play the video.

00:12
Hi.
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You might have noticed
that I have half a beard.
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It's not because I lost a bet.
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Many years ago, I was badly burned.
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Most of my body is covered with scars,
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including the right side of my face.
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I just don't have hair.
That's just how it happened.
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It looks symmetrical, but almost.
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Anyway, now that we discussed facial hair,
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let's move to social science.
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And in particular, I want us to think
about where is the potential for humanity
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and where we are now.
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And if you think about it,
there's a big gap
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between where we think we could be
and where we are,
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and it's in all kinds of areas.
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So let me ask you:
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How many of you in the last month
have eaten more than you think you should?
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Just kind of general. OK.
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How many of you in the last month have
exercised less than you think you should?
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OK, and for how many of you
has raising your hands twice
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been the most exercise you got today?
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01:10
(Laughter)
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01:13
How many of you have ever
texted while driving?
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01:18
OK, we're getting honest.
Let's test your honesty.
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How many people here in the last month
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have not always washed your hands
when you left the bathroom?
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01:26
(Laughter)
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A little less honest.
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By the way, it's interesting how we're
willing to admit texting and driving
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but not washing our hands,
that's difficult.
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(Laughter)
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We can go on and on.
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The problem, the topic is
that there's lots of things
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when we know what we could do --
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we could be very, very different,
but we're acting in a very different way.
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And when we think
how do we bridge that gap,
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the usual answer is, "Just tell people."
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For example, just tell people
that texting and driving is dangerous.
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Did you know it's dangerous?
You should stop doing it.
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You tell people something
is dangerous, and they will stop.
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Texting and driving is one example.
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Another very sad example
is that in the US,
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we spend between seven
and eight hundred million dollars a year
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on what's called "financial literacy."
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02:11
And what do we get
as a consequence of that?
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There was recently a study that looked
at all the research ever to be conducted
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on financial literacy --
what's called a meta-analysis.
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And what they found is that
when you tell people,
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you teach them financial literacy,
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they learn and they remember.
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But do people execute? Not so much.
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The improvement is about
three or four percent
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immediately after the course,
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and then it goes down.
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And at the end of the day,
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the improvement is about 0.1 percent --
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not zero, but as humanly close
to zero as possible.
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(Laughter)
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So that's the sad news.
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The sad news is, giving
information to people
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is just not a good recipe
to change behavior.
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What is?
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Well, social science
has made lots of strides,
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and the basic insight is that
if we want to change behavior,
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we have to change the environment.
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The right way is not to change people,
it's to change the environment.
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And I want to present a very simpleminded
model of how to think about it:
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it's to think about behavioral change
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in the same way that we think about
sending a rocket to space.
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When we think about
sending a rocket to space,
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we want to do two main things.
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The first one is to reduce friction.
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We want to take the rocket
and have as little friction as possible
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so it's the most aerodynamic possible.
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And the second thing is we want
to load as much fuel as possible,
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to give it the most amount
of motivation, energy to do its task.
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And behavior change is the same thing.
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So let's first talk about friction.
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In this particular case study
I'll tell you about,
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there's a pharmacy, an online pharmacy.
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Imagine you go to your doctor.
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You have a long-term illness,
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your doctor prescribes
to you a medication,
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you sign up for this online pharmacy
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and you get your medication
in the mail every 90 days.
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04:01
Every 90 days, medication,
medication, medication.
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And this online pharmacy
wants to switch people
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from branded medication
to generic medication.
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So they send people letters, and they say,
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"Please, please, please,
switch to generics.
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You will save money, we will save money,
your employer will save money."
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And what do people do?
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Nothing.
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So they try all kinds of things
and nothing happens.
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So for one year, they give people
an amazing offer.
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They send people a letter, and they say,
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"If you switch to generics now,
it will be free for a whole year."
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Free for a whole year. Amazing!
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What percentage of people
do you think switched?
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Less than 10 percent.
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At this point, they show up to my office.
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And they come to complain.
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Why did they pick me?
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I wrote a couple of papers
on the "allure of free."
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In those papers, we showed
that if you reduce the price of something
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for, let's say, 10 cents to one cent,
nothing much happens.
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You reduce it from one cent to zero,
now people get excited.
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(Laughter)
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And they said, "Look, we read these
papers on 'free,' we gave 'free.'
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Not working as we expected.
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What's going on?"
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I said, "You know, maybe
it's a question of friction."
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They said, "What do you mean?"
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I said, "People are starting with branded.
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They can do nothing and end with branded.
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To move to generic, they have to choose
generic over branded,
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but they also have to do something.
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They have to return the letter."
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So this is what we call
a "confounded design."
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Two things are happening at the same time.
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It's branded versus generic,
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but it's doing nothing
versus doing something.
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So I said, "Why don't we switch it?
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Why don't we send people a letter
and say, 'We're switching you to generics.
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You don't need to do anything.
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If you want to stay with branded,
please return the letter.'"
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(Laughter)
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Right?
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What do you think happened?
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Lawyers, lawyers happened.
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(Laughter)
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It turns out, this is illegal.
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(Laughter)
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By the way, for brainstorming
and creativity,
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doing things that are illegal
and immoral, it's fine,
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as long as it's just
in the brainstorming phase.
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(Laughter)
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But this was the purity of the idea,
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because the initial design was
the branded had the no-action benefit.
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In my illegal, immoral design,
generic had the no-action benefit.
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But they agreed to give people
a T-intersection:
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send people a letter and say,
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"If you don't return this letter,
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we will be forced
to stop your medications.
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But when you return the letter,
you could choose branded at this price,
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generic at this price."
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Now people had to take an action.
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They were on even footing. Right?
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It wasn't that one had
the no-action benefit.
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What percentage do you think switched?
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The vast majority switched.
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So what does it tell us?
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Do people like generics,
or do we like branded?
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We hate returning letters.
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(Laughter)
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This is the story of friction:
small things really matter.
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And friction is about taking
the desired behavior
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and saying: Where do we have
too much friction
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so it's slowing people down
from acting on it?
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And every time you see
that the desired behavior
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and the easy behavior are not aligned,
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it means we want to try and realign them.
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That's the first part.
We talked about friction.
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Now let's talk about motivation.
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In this particular study,
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we were trying to get very poor people
in a slum called Kibera in Kenya
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to save a little bit of money
for a rainy day.
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You know, if you're very, very poor,
you have no extra money,
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you live hand to mouth,
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and from time to time, bad things happen.
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And when something bad happens,
you have nothing to draw on, you borrow.
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The Kibera people can borrow at sometimes
up to 10 percent interest a week.
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And then, of course,
it's really hard to get out of it.
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You live hand to mouth,
something bad happens,
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you borrow, things get worse
and worse and worse.
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So we wanted people to keep
a little bit of money for a rainy day.
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And we thought about
what is the motivation,
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what is the fuel that we need to add?
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And we tried all kinds of things.
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Some people, we texted them
once a week and said,
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"Please try to save 100 shillings" --
about a dollar -- "this week."
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Some people, we sent a text message
as if it came from their kids.
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So it said, "Hi Mom, hi Dad,
this is little Joey" --
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whatever the name of the kid was --
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"Try and save 100 shillings this week
for the future of our family."
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Right? I'm Jewish, a little bit
of guilt always works.
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(Laughter)
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Some people got 10 percent.
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"Save up to a hundred shillings,
we'll give you 10 percent."
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Some people got 20 percent.
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Some people got also
10 percent and 20 percent,
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but they got it with loss aversion.
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What is loss aversion?
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Loss aversion is the idea
that we hate losing
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more than we enjoy gaining.
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Now, think about somebody
who is in a 10-percent condition
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and they put 40 shillings in.
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They put 40 shillings,
we give them four more,
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they say thank you very much.
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That person gave up six.
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They could have gotten six more
if they gave a hundred,
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but they don't see it.
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So we created what we call pre-match.
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We put the 10 shillings in
at the beginning of the week.
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We said, "It's waiting for you!"
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And then if somebody puts 40 in,
we say, "Oh, you put 40 in,
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we're leaving four,
and we're taking six back."
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So in both cases, pre-match or post-match,
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people get 10 percent.
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But in the pre-match,
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they see the money they did not match
leaving their account.
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So we have text, text from kids,
10 percent, 20 percent,
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pre-match, post-match.
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And we had one more condition.
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It was a coin about this size,
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with 24 numbers written on it.
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And we asked them to put the coin
somewhere in their hut,
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and every week, take a knife
and scratch the number for that week --
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week one, two, three, four --
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scratch it like a minus
if they didn't save
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and scratch it up and down if they saved.
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Now, think to yourself:
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Which one of those methods
do you think worked the best?
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Text, text from the kids,
10 percent, 20 percent,
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10:00
beginning of the week,
end of the week, and the coin?
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I'll tell you what
the average people think.
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We've done these studies of prediction,
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both in the US and in Kenya.
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People think that 20 percent
will get a lot of action,
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10 percent less,
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the rest of it will do nothing --
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kids, coin, doesn't matter.
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People think loss aversion
will have a small effect.
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What actually happened?
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Sending a text reminder once a week
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helps a lot.
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Good news!
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This program lasted six months.
People forget. Reminding people is great.
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Ten percent at the end
of the week helped some more.
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Financial incentives work.
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Twenty percent at the end of the week --
just like 10 percent, no difference.
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Ten percent in the beginning of the week
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helps some more.
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Loss aversion works.
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Twenty percent in
the beginning of the week,
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just like 10 percent in the beginning
of the week, no difference.
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And the text message from the kids
was just as effective
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as 20 percent plus loss aversion --
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which is amazing, right?
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It's amazing how motivating
messages from kids were.
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And one conclusion is
we don't use kids enough.
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(Laughter)
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And, of course, I don't mean
in a child labor sense.
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But if you think about
parents and their kids,
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we are the best that we can for our kids,
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and we think about the future,
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and I think we should think
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about how to use that amazing
source of motivation
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to get parents to behave in a better way.
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But the big surprise
of this study was the coin.
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The coin basically doubled savings
compared to everything else.
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And now the question is: Why?
What was it about the coin?
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So I'll tell you how I started
thinking about the coin,
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and then we'll come back to it.
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So you know, when I do research
on, let's say, buying coffee,
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I don't need to go anywhere.
I can sit in my office.
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696254
2452
11:50
I've bought enough coffee.
I know how it works.
266
698730
2213
11:52
The details, I'm familiar with.
267
700967
1936
11:54
When you do research in some
of the poorest places in the world,
268
702927
3107
11:58
you have to go and visit
and see what's going on
269
706058
2279
12:00
and get some insight
about how the system works.
270
708361
2586
12:03
And on that particular day,
271
711589
1367
12:04
I'm in a place called Soweto
in South Africa,
272
712980
2525
12:07
and I'm sitting in a place
that sells funeral insurance.
273
715529
3623
12:11
You know, in the US people spend
crazy amounts of money on weddings?
274
719990
3888
12:15
In South Africa, it's funerals.
275
723902
2007
12:18
People spend up to a year
or two years of income on funerals.
276
726365
4984
12:23
And I sit in this place --
277
731912
2798
12:26
by the way, before you judge the South
Africans as being irrational with this,
278
734734
4972
12:31
I just want to remind you
279
739730
1200
12:32
that spending a lot of money
on funerals compared to weddings,
280
740954
3304
12:36
at least you know for sure
you only have one.
281
744282
2507
12:38
(Laughter)
282
746813
3043
12:48
OK, so I sit in this place
that sells funeral insurance.
283
756000
5045
12:53
And this guy comes in with his son --
his son is about 12 --
284
761069
3971
12:57
and he buys funeral insurance for a week.
285
765064
3259
13:00
It will cover 90 percent
of his funeral expense
286
768821
2630
13:03
only if he dies in the next seven days.
287
771475
2156
13:06
Right? These are very poor people,
they buy small amounts of insurance
288
774353
3305
13:09
and small amount of soap and such.
289
777682
1661
13:11
And he gets that certificate,
290
779367
1803
13:13
and in a very ceremonious way,
he gives it to his son.
291
781194
2670
13:16
And as he gives it to his son,
I think to myself, why the ceremony?
292
784456
3249
13:19
What is this father doing?
293
787729
1528
13:21
Now, think about the breadwinner
that decides on that particular day
294
789281
4035
13:25
to direct some money
into insurance or savings.
295
793340
2420
13:28
What is the family going to see tonight?
296
796587
2341
13:31
They're going to see less.
297
799939
1570
13:33
Right? At that level of poverty, there'll
be less food, less kerosene, less water --
298
801533
4058
13:37
something less tonight.
299
805615
1855
13:39
And what his father was doing
and what our coin was trying to do
300
807494
3263
13:42
is to say, yes, there's less
food on the table,
301
810781
2568
13:45
but there's another activity.
302
813373
1647
13:47
You see, what happened is, there are
many good, important economic activities,
303
815728
3790
13:51
like savings and insurance,
that are invisible.
304
819542
2528
13:54
And now the question is:
How do we make them visible?
305
822620
2879
13:58
So let's go back to our rocket model.
306
826105
3732
14:02
We have to, first of all,
look at the system
307
830373
2274
14:04
and see where there's little things
we can fix, with friction,
308
832671
3699
14:08
where is there
that we can remove friction?
309
836394
2356
14:10
And then the next thing we want to do
is to think broadly about the system,
310
838774
3852
14:14
and say: What other motivations
can we bring in?
311
842650
3383
14:18
And that's a much more difficult exercise,
312
846057
2022
14:20
and we don't always know
what would work best.
313
848103
2522
14:22
Is it going to be money?
Is it going to be loss aversion?
314
850649
2692
14:25
Is it going to be
something that is visible?
315
853365
2079
14:27
We don't know, and we have
to try different things.
316
855468
2626
14:30
We also have to realize that
our intuition sometimes misleads us.
317
858118
3066
14:33
We don't always necessarily know
what would work the best.
318
861208
3377
14:37
So if we think about this gap
319
865099
1878
14:39
between where we could be
and where we are,
320
867001
2184
14:41
it's a really sad thing to see this gap
and to think about it.
321
869209
3729
14:44
But the good news is,
there's lots we can do.
322
872962
2401
14:47
Some of the changes are easy,
some of the changes are more complex.
323
875904
3231
14:51
But if we'll attack each problem directly,
324
879159
2657
14:53
not by just providing
more information to people
325
881840
3472
14:57
but trying to change the friction,
326
885336
1739
14:59
add motivation,
327
887099
1270
15:00
I think we can ...
328
888393
1297
15:01
Can we close the gap? No.
329
889714
1856
15:03
But can we get much better?
Absolutely, yes.
330
891594
3010
15:06
Thank you very much.
331
894628
1216
15:07
(Applause)
332
895868
3760
Translated by Joseph Geni
Reviewed by Camille Martínez

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ABOUT THE SPEAKER
Dan Ariely - Behavioral economist
The dismal science of economics is not as firmly grounded in actual behavior as was once supposed. In "Predictably Irrational," Dan Ariely told us why.

Why you should listen

Dan Ariely is a professor of psychology and behavioral economics at Duke University and a founding member of the Center for Advanced Hindsight. He is the author of the bestsellers Predictably IrrationalThe Upside of Irrationality, and The Honest Truth About Dishonesty -- as well as the TED Book Payoff: The Hidden Logic that Shapes Our Motivations.

Through his research and his (often amusing and unorthodox) experiments, he questions the forces that influence human behavior and the irrational ways in which we often all behave.

More profile about the speaker
Dan Ariely | Speaker | TED.com

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